Uncertainty, angst rise as retaliatory tariffs imposed on US goods

By Paul Wiseman and Michelle R. Smith

Updated
2:25 pm PDT, Friday, June 22, 2018

A Florida boat builder absorbs $4 million in lost business and expects more pain. An Ohio pork producer is losing access to a vital export market and fears the damage will last years. A motorcycle shop near Cologne, Germany, wonders if it even has a future.

A brawl that the United States provoked with its closest trading partners is starting to draw blood. On Friday, the European Union began imposing tariffs on $3.4 billion in American goods — from whiskey and motorcycles to peanuts and cranberries — to retaliate for President Trump’s own tariffs on imported steel and aluminum. China, India and Turkey had earlier begun penalizing American products in response to the U.S. tariffs on metals.

Pork producers like Heimerl are already suffering from plunging prices and reduced income since China’s move to impose a 25 percent tariff on American pork in retaliation for Trump’s tariffs on imported steel and aluminum.

If the trade rift doesn’t worsen, the damage to the overall economy likely will be modest, said Mark Zandi, chief economist at Moody’s Analytics. But no one can say that the economic harm will end soon.

On July 6, the United States is set to slap tariffs on $34 billion in Chinese goods to punish Beijing for forcing American companies to hand over technology in exchange for access to China’s market and other brass-knuckled attempts to supplant U.S. technological dominance.

Beijing has vowed to retaliate. And Trump has threatened to punch back again with tariffs that could eventually cover $450 billion in Chinese products — representing nearly 90 percent of all goods Beijing exports to the United States.

Escalating tariffs likely would raise prices for consumers, inflate costs for companies that rely on imported parts, rattle markets and paralyze business investment as executives wait to see whether the United States can reach a truce with the trading partners it’s fighting with.

A full-fledged trade war, economists at Bank of America Merrill Lynch warn, risks tipping the U.S. economy into recession.

In the next round of tariffs, the Chinese are preparing retaliatory penalties on American soybeans — an economically vital export of Midwestern farmers, who have been a key source of support for Trump.

The Europeans, too, targeted American products with political calculation — bourbon from Kentucky, the home state of Senate Majority Leader Mitch McConnell, and motorcycles, which are made in Wisconsin, represented by House Speaker Paul Ryan.